Friday, August 26, 2011


Maybe I should just start a majority of my posts, "I was over at Morgan's, havin' a drink and a stogie, and  ...."    (while you're there, read Severian's excellent comment)
As I alluded to over on this EconLog post, economic discussions often reduce to two camps:
•People who think of the economy in a very simplistic (essent[ia]lly cartoonish) way, abstracting away all details and likening it to a machine you can control and tune – tweaking dials, pulling levers, opening valves, priming pumps.
•People who don’t, and who instead think the economy is pretty complicated, and details matter.
Now, fine. Two approaches, to each his own, right? But here’s what I find astonishing:
The former group thinks they are Smart and they look down with sneering contempt on the intelligence of the latter group.
Morgan thought that was inexplicable.

Actually, it’s pretty explicable.

They think economics is a “science”. It really isn’t, for the same kinds of reasons psychology is not a science. If it were, and the “scientists” (economists) were correct, then of course the Economy should be run by “experts” through the State. Anyone who believes otherwise is obviously “unscientific” in their eyes.

It goes further. “Experiments” in economics look like the USSR, Cuba, the New Deal, The Raw Deal (Obama ;-) ) China, North Korea, and to a bit lesser extent … Europe. So what do we have here (theoretically) in America?

The fact of the matter is is that Economics is a part of human behavior. It cannot be dictated any more than our hunger or other drives. Economics is a study in what people value, how much and how much they value it compared with other things. You can’t dictate that. It just is. And when you mess with it, well … how’d that old ad go? It’s not nice to fool Mother Nature!

Capitalism is not so much an economic plan, but a recognition that there can be no economic plan that is compatible with Liberty. It’s more like an economic “lack of plan”, or more accurately, millions and millions of micro-economic plans working together in symbiosis on their own, creating and breaking associations as each sees fit in the persuit of happiness. It is an “ism” to economics as nihilism is an “ism” to philosophy.

Of course, they don’t get any of that. It’ s much more reassuring to believe there is, or can be, someone with an Economic Plan™ than will “work” than it is to believe that the best economic plan is to Let It Be. Our plan is to have no plan, or to plan to let everyone plan their own plan.

Now that is a true “collective” plan!


Severian said...

Thanks as always for the linky-love, Phil!

I don't know if I was making much sense with that "Platonic forms" business, but that's the best description I can come up with. Of course, I live my life in close proximity to higher-ed types, so I suppose all my analogies will have a tendency towards dorkiness...

Anyway.... Sometimes when I try to understand the liberal mindset, I feel sorry for them. I remember thinking that way, too. I was in high school, and I read something, and all of a sudden it hit me: it's all, like, relative, man! Most of this stuff is actually, dude, a social construction! It's dynamite stuff when you're seventeen and don't know your ass from a hole in the ground.

It actually takes a lot of maturity before you realize how little you know. It takes a lot more maturity to be able to admit it. I have some ideas on how the economy should go, sure, but given that whenever my internet goes down I basically blame evil spirits and bad juju, I'm willing to admit that my macroeconomic theories are worth exactly what you pay for them...

But then again, I'm not invested in the idea that I'm always and everywhere the smartest guy in the room. It's a sign of a weak, or at least unfurnished, mind to always go to the big abstract category when thinking about a particular problem. It's a way of guaranteeing that if you can't be right, at least they'll never be able to conclusively prove you wrong. There are so many things in life of sufficient complexity that mastering them means pretty much ignoring everything else... which is why, say, mechanics are great with cars and generally not so hot on other stuff. Only the liberal and the adolescent (same diff, really) think that one person can be an expert without portfolio, as good on tax policy as he is on immigration law, climate science, philosophy, history, law, etc.....

But since macroeconomic theories are big fat abstractions, insecure people feel they can opine on them without really knowing much.

Whitehawk said...

I think of economics like I think of a budget. They are both the discipline of studying what HAS happened. You can make a budget out and say you are going to spend X amount on maintenance next year then your roof blows off in a storm. Guess what, your gonna spend more on maintenance this year than you planned.

Economics is to a large degree is the same. All we can say for sure is what we did last year (if you kept good records.)

(The Lowes on the east coast didn't plan to sell ten times more generators this year than last but I bet they did.)

There are general principle that influence the economy of course and they should be observed with great care.

When you try to micromanage or control you only tend to demonstrate your folly. The Chevy volt is an example of this.

If you haven't read The Forgotten Man it is a great study on this. Amity Schlaes reveals this working in the FDR adim.

It's like you said, economics is driven by human nature and who can predict that?